Man U debt could end up being an own goal

When the 11 players of Manchester United take to the soccer field and face Hong Kong on July 23, each of them will be carrying 34 million ($87 million) of debt owed by US billionaire Malcolm Glazer.

Debt, which has ravaged English soccer, is taking a grip on the world's biggest sports franchise.

United will take on 374 million in loans despite a decline in television revenue and problems on the pitch.

Glazer, 76, the owner of the Tampa Bay Buccaneers, who fought shareholders and fans to acquire Manchester United, will be paying among the highest rates ever levied on a European buyout loan to finance his 790 million.

JPMorgan Chase is charging him interest margins starting at 2.75 percentage points over benchmark interest rates, 0.5 of a percentage point more than on most seven-year buyout loans.

"This level of debt can kill you," said Stephen Schechter, former head of cross-border debt at Lazard. "This isn't a leveraged buyout of a nice, boring manufacturing company."

The debt load is for a team whose revenue fell in 2004 for the first time in eight years, to 169.1 million.

The team's decline has not been limited to finances. Last season they failed for the second year on the trot to reach the quarter-finals of Europe's Champions League.

Glazer's loan package is made up of 283.9 million in acquisition financing plus 50 million for working capital and 40 million for capital expenditure, such as improvements to the Old Trafford stadium. Glazer also sold 275 million of notes to hedge funds.

"His financing and business plan are on a knife-edge," said Sean Bones, vice-chairman of Shareholders United.

The pressure group has called on its 31,000 members to boycott sponsors including Nike and Vodafone.

Of the 187 seven-year buyout loans tracked since 1999, only 14 have margins higher than 2.25 percentage points above benchmark lending rates.

In addition to the seven-year credit, the package calls for margins above 2.75 percentage points on an eight-year loan and exceeding 3.25 percentage points for a nine-year deal.

Leeds United, a Champions League semi-finalist four years ago, was close to bankruptcy last year after amassing debt of 100 million.

One in three English soccer clubs have sought bankruptcy protection since 1997 as they piled on debt to buy players.

Glazer may end up paying the equivalent of 88 million a year to banks and hedge funds if he uses all the loans.

That's more than United spent in total on forwards Wayne Rooney, Ruud van Nistelrooy, Cristiano Ronaldo, Alan Smith and Louis Saha.

In addition to failing to reach the quarter-finals of Europe's Champions League, the club finished third in the Premiership, 18 points behind champions Chelsea.

Florida-based Glazer controls at least 76 per cent of United after he built a stake over two years.

- BLOOMBERG